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Stafford Loans: The Largest Student Loan Program

The federal Stafford Loan Program is the biggest source of low-interest college loans. In fact, almost any college student can get one.

The following information applies to undergraduate Stafford loans disbursed on or after July 1, 2019 through June 30, 2020. Loan rates and fees are updated annually.

Why Consider a Stafford Loan?

Stafford loans (also called Direct loans) are provided by the federal government. Stafford Loans generally have lower interest rates and more flexible repayment terms than consumer loans. If you qualify for financial aid, a Stafford loan comes with an advantage: the government pays (or subsidizes) your loan interest while you are in college. This is called a "subsidized" loan. If you don't have financial need, you are still eligible for an "unsubsidized" loan, but interest will begin to accumulating as soon as you receive the loan.

Stafford Student Loan Interest Rates and Fees

For the 2019–2020 school year, the interest rate for new subsidized and unsubsidized undergraduate Stafford loans is 4.53 percent. This rate is fixed for the life of the loan. A new interest rate is determined each year based on financial market conditions and will not exceed 8.25 percent. The loan fees are about 1 percent of the loan amount.

Stafford Loan Limits

Dependent student limits. A dependent freshman can borrow a subsidized loan up to $3,500 a year. The limit goes up to $4,500 for sophomores and $5,500 for juniors and seniors. Dependent undergraduates can borrow up to $2,000 in additional unsubsidized loans.

Independent student limits. Independent students have the same limits for subsidized loans, but they can borrow larger unsubsidized loans: up to $6,000 for freshmen and sophomores and up to $7,000 for juniors and seniors.

Total limits. The total amount of loans for a dependent undergraduate student is limited to $31,000 ($23,000 of which can be subsidized). The limit is $57,500 for independent undergraduate students ($23,000 of which can be subsidized).

Time limits. The time limit for receiving subsidized loans is equal to 150 percent of the published length of the degree program. For example, a student enrolled in a four-year degree program can receive subsidized loans for up to six years. This time limit does not apply to unsubsidized loans.

Applying for Stafford Loans

As with all federal loans, students apply by submitting the FAFSA (Free Application for Federal Student Aid). The college will offer the loan to the student in its financial aid award letter. The loan must be used only for educational purposes and the student must maintain satisfactory academic progress as determined by the school.

The college will use the money to pay the student's tuition, fees, and room and board. If loan funds remain, they will be returned to the student to use for other educational expenses.

Repayment Plans Are Flexible

The plans allow between ten and twenty-five years to repay a Stafford loan, with payments beginning six months after the student leaves college or drops below half-time enrollment.

  • The standard plan sets up the same payment amount every month (with a minimum payment of $50).
  • The graduated plan starts out with lower payments that increase every two years. Students must repay this loan within ten years.
  • The extended plan sets up either a fixed or graduated payment over a period of twenty-five years. These are for large loan amounts.
  • The four income-driven plans allow payments to fluctuate according to the borrower's annual income, family size, and other factors. For example, the Revised Pay As You Earn plan reduces monthly loan payments to 10 percent of discretionary income and forgives the remaining loan balance after 20-25 years of consistent payments.

With few exceptions, not repaying a student loan will lead to garnishment of wages and income tax refunds, and a negative impact on credit history. Not even bankruptcy can clear a borrower of student loan debt.

Note: Financial information provided on this site is of a general nature and may not apply to your situation. Contact a financial or tax advisor before acting on such information.

What's Next?

Find out about PLUS Loansprivate loans, and other borrowing options for college.

Learn how to improve your financial aid eligibility.

Use the Student Loan Calculator from 1FBUSA to find out how student loans may affect your financial future. See what your loan payments will be compared with how much you can afford to pay based on your expected salary after graduation.